The state’s system of local control over marijuana businesses — in which a single municipal official often decides the fate of a company — is ripe for abuse, a growing chorus of politicians said following the arrest of Fall River’s mayor last week on charges that he shook down cannabis companies for hundreds of thousands of dollars.
“Maybe the state needs to put something in place that says, ‘It needs to actually be a governing entity, not a single person,’ ” Governor Charlie Baker told the Globe on Monday, “because that’s a legit concern.”
Baker joined state legislators in calling for changes following the arrest Friday of Mayor Jasiel Correia II, who was accused of pressuring businesses to pay $575,000 in cash bribes in exchange for city approval. Correia has pleaded not guilty.
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“It’s a perfect storm for corruption — the combination of a highly competitive industry and a mayor who was solely responsible for approving” the businesses, FBI Special Agent in Charge Joseph Bonavolonta said Friday.
His comments echoed those of US Attorney Andrew Lelling, whose office indicted Correia, and of Massachusetts Inspector General Glenn Cunha, who said he hoped the state would explore reforms.
The Fall River case has lent more urgency to a long-simmering debate over how much power cities and towns should have — and whether any outside watchdogs should oversee them — in picking winners and losers in the lucrative pot industry. Massachusetts is an outlier among states with legalized marijuana in its level of deference to municipalities, cannabis lawyers say.
“It really reiterates why further guardrails around these local marijuana decisions are necessary,” said state Senator Julian Cyr, who proposed a bill that would assign oversight of pot businesses’ payments to the state Cannabis Control Commission. He said the Legislature should also discuss whether to require municipalities to award licenses through a local voting body, rather than behind closed doors.
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“If there’s any silver lining from the reprehensible actions of the mayor of Fall River, it’s that they’ll spur us to look at the issue more urgently,” Cyr said.
Cannabis activists found the new momentum refreshing — and frustrating, as they have long complained that the current system invites corruption, lacks transparency, and favors wealthier companies.
State law requires each marijuana business to sign a contract with a town or city before it can apply for a state license.
The contracts, called host-community agreements, can include “impact fees,” intended to offset any costs to the municipality. State law limits the fees to 3 percent of the businesses’ sales once they open.
But with no one overseeing the contracts, the vast majority of agreements have exceeded that 3 percent cap, with extra payments for the local government, nonprofits, police departments, or other groups. That can add up to tens of thousands of dollars, or more, for a city or town.
The state cannabis commission voted last year 4-1 to not regulate the contracts, doubting its legal authority to do so. But after more evidence of abuses emerged, the commission voted in January to request the Legislature to grant it explicit authority over the deals.
“So many of us have been trying to call attention to this for so long, and finally someone is paying attention — and it’s federal prosecutors. That’s surprising but welcomed,” said cannabis commissioner Shaleen Title, the sole commissioner who advocated for the agency to oversee the contracts. “When there’s no check on municipal overreach, it creates an environment that’s ripe for individual corruption.”
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The Massachusetts Municipal Association, which has long defended the current system, said it was open to discussing changes but that the extraordinary Fall River case shouldn’t cast doubt on the thousands of honest local officials.
“Any process is open to abuse by an ill-intentioned person, no matter what safeguards are in place,” executive director Geoff Beckwith said Monday. “That’s why we have an attorney general, a US attorney, an ethics commission, and district attorneys.”
State Senator Sonia Chang-Diaz, who cochairs the Legislature’s marijuana policy committee, said it was obvious even before Correia’s arrest that the balance of power in marijuana licensing had tipped too heavily in favor in municipalities. One obvious symptom, she said, is the dominance of the recreational industry so far by larger, well-financed companies. Meanwhile, she said, startups owned by local people and minority entrepreneurs have rarely made it through the local approval process.
“It’s something we’re treating with a high level of urgency,” Chang-Diaz said, noting that the committee held a hearing in July on proposed host community agreement legislation.
The political prospects of numerous pending bills that would reform the host community agreement process remain unclear. House Speaker Robert DeLeo seemed unaware of the controversy, inaccurately telling reporters Monday that no bills have been filed on the issue. A DeLeo spokeswoman later said DeLeo intended to indicate that no bills have emerged from the committee.
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Massachusetts is unique in requiring the contracts, said Adam Fine, a partner at national cannabis law firm Vicente Sederberg. In such states as California and Nevada, towns and cities control cannabis business locations and other aspects through zoning boards or local licensing boards.
“That’s typically a more fair way to do it,” Fine said. “You actually have some sort of process and transparency around how you get a license, rather than saying, ‘It’s one person at the executive branch who can give it under secrecy.’ ”
The contracts arose when lawyers and activists were writing the 2016 ballot initiative to legalize marijuana. They knew that some municipalities would hesitate to allow a new business selling a controversial product, so they wanted to offer an incentive: local sales tax dollars, and if any costs were incurred as a result, the business should reimburse them.
Despite the intentions of the law, Title said, almost immediately, “We started to see that the clearly defined limits in the law were being brazenly ignored,” especially in the financial demands they made.
Allegations of unfairness, secrecy, and favoritism have dogged the local approvals processes in cities and towns across the state. In Amesbury, a pot store applicant said the mayor pressured her to pay to pave a rotary in exchange for a host community agreement. The mayor defended his actions.
Cunha, the inspector general, said, he hoped the indictment of Correia would “prompt the CCC, the Legislature, and others to evaluate what additional safeguards or reforms are necessary.”
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Regardless of the outcome of the Fall River case, some officials said they felt a new day had arrived.
“The previous environment of unchecked local power and ‘anything goes’ — that era is probably over,” Title said.
Shirley Leung and Victoria McGrane of the Globe staff contributed to this report. Naomi Martin can be reached at naomi.martin@globe.com. Dan Adams can be reached at daniel.adams@globe.com.